Handset makers brace for turbulence

Now that all three major telecoms carriers are selling the Apple iPhone, industry observers say Japanese handset makers are in for tough times.

“In the short term, it will be a blow to the Japanese makers. The winter marketing season is coming up and I think the iPhones will be taking center stage,” said Tsutsumu Ishikawa, a journalist who watches the cellphone industry.

Armed with the new iPhone 5S and 5C, which hit store shelves Friday, industry leader NTT DoCoMo Inc. is mixing it up with rivals KDDI Corp. and Softbank Corp.

Until now, DoCoMo — which has more than 60 million customers — only marketed smartphones powered by Google’s Android operating system, the Japanese makers’ OS of choice.

How hard DoCoMo’s decision will hit Japanese handset makers depends on how strongly it promotes the iPhones, but regardless the local champs will need to come up with new strategies and attributes to survive the competition, experts said.

The key could be launching new devices that work with smartphones and establishing tie-ups with powerful players in other fields, they said.

“With DoCoMo now selling iPhones, I think some negative impact is inevitable for those makers that provided a large number of handsets to DoCoMo,” said Atsuro Sato, a technology and communications analyst at research company Gartner Japan Ltd.

But it’s too early to gauge the magnitude because it is still unclear how DoCoMo will push the iPhones, Sato said.

According to MM Research Institute Ltd., a Tokyo-based research firm, Apple Inc. led the field with a market share of 25.5 percent in fiscal 2012, followed by Fujitsu Ltd. with 14.4 percent.

Japan was slow to latch onto the smartphone trend and has been struggling to catch up. NEC Corp., which once commanded the largest share of the market, announced its withdrawal from the sector last month. Panasonic Corp. is thinking of halting production of the devices for the individual customer market.

But while the latest iPhone models are likely to form the core of the three carriers’ lineups, Ishikawa said this doesn’t necessarily mean Japan should give up.

“When we think in the long term, the three carriers will have a tough time differentiating themselves because they will allbe carrying iPhones. This means they will have to use the Android handsets to carve out specialties,” leaving the door open to local handset makers, Ishikawa said.

Indeed, since iPhone services and the user interface are strictly controlled by Apple, there isn’t a lot of room to customize the phones. Android, on the other hand, provides plenty of room in this regard.

Some makers are already finding a niche. For example, Fujitsu makes smartphones designed for seniors and has been enjoying favorable sales.

However, smartphones have been around long enough now that their evolution has reached the stage where the handsets themselves will probably not undergo any more drastic changes.

Indeed, nearly all of the latest smartphones come with a high-resolution display and cutting-edge processor that make it hard to stand out in terms of hardware.

Still, Ishikawa said one recent trend is that the global makers are introducing peripheral devices, such as Samsung Electronics Co.’s Galaxy Gear, a wearable watch-type device that works with smartphones.

Sony Corp. also makes a watch-type device and plans to launch digital cameras that look like just a lens but can be attached to a smartphone.

“I think it will be vital for the makers to create their own world centered around the smartphones,” Ishikawa said.

Meanwhile, Sato of Gartner said Japanese cellphone makers could also survive the competition by partnering with strong players in other fields.

For instance, the smartphone environment includes powerful service providers, such as Line, a communications application provider with more than 200 million users.

Teaming up with those players and carriers to manufacture handsets with special features could be vital for the phone makers, said Sato.

While the competition within the smartphone industry is getting all the media attention now, Sato said growth of smartphone sales is expected to slow down globally.

“The hardware makers will need new seeds of growth,” whether that will be wearable devices or other possibilities, he said.